Federal Credit Reform Act of 1990

Retrieved from: http://www.fms.treas.gov/ussgl/creditreform/fcra.html 1

Title V TITLE V--CREDIT REFORM

§ 500 SEC. 500. SHORT TITLE.

 This title may be cited as the "Federal Credit Reform Act of 1990";.

§ 501 SEC. 501. PURPOSES.

 The purposes of this title are to--

§ 501(1)

 (1) measure more accurately the costs of Federal credit programs;

§ 501(2)

 (2) place the cost of credit programs on a budgetary basis equivalent 

to other Federal spending;

§ 501(3)

 (3) encourage the delivery of benefits in the form most appropriate to 

the needs of beneficiaries; and

§ 501(4)

 (4) improve the allocation of resources among credit programs and 

between credit and other spending programs.

§ 502 SEC. 502. DEFINITIONS.

 For purposes of this title--

§ 502(1)

 (1) The term "direct loan" means a disbursement of funds by the 

Government to a non-Federal borrower under a contract that requires the 

repayment of such funds with or without interest. The term includes the 

purchase of, or participation in, a loan made by another lender and 

financing arrangements that defer payment for more than 90 days, 

including the sale of a government asset on credit terms. The term does 

not include the acquisition of a federally guaranteed loan in satisfaction of 

default claims or the price support loans of the Commodity Credit 

Corporation.

§ 502(2)

 (2) The term "direct loan obligation" means a binding agreement by a 

Federal agency to make a direct loan when specified conditions are 

fulfilled by the borrower.

§ 502(3)

 (3) The term "loan guarantee" means any guarantee, insurance, or 

other pledge with respect to the payment of all or a part of the principal 

or interest on any debt obligation of a non-Federal borrower to a nonFederal lender, but does not include the insurance of deposits, shares, or 

other withdrawable accounts in financial institutions.

§ 502(4)

 (4) The term "loan guarantee commitment" means a binding 

agreement by a Federal agency to make a loan guarantee when specified 

conditions are fulfilled by the borrower, the lender, or any other party to 

the guarantee agreement.

§ 502(5)(A)

 (5)(A) The term "cost" means the estimated long-term cost to the 

Government of a direct loan or loan guarantee or modification thereof, 

calculated on a net present value basis, excluding administrative costs 

and any incidental effects on governmental receipts or outlays.

§ 502(5)(B)

 (B) The cost of a direct loan shall be the net present value, at the 

time when the direct loan is disbursed, of the following estimated cash 

flows:

§ 502(5)(B)(i)

 (i) loan disbursements;

§ 502(5)(B)(ii)

 (ii) repayments of principal; and

§ 502(5)(B)(iii)

 

 

 (iii) payments of interest and other payments by or to the 

Government over the life of the loan after adjusting for estimated 

defaults, prepayments, fees, penalties, and other recoveries;
Federal Credit Reform Act of 1990

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 including the effects of changes in loan terms resulting from the exercise 

by the borrower of an option included in the loan contract.

§ 502(5)(C)

 (C) The cost of a loan guarantee shall be the net present value, at 

the time when the guaranteed loan is disbursed, of the following 

estimated cash flows:

§ 502(5)(C)(i)

 

 (i) payments by the Government to cover defaults and 

delinquencies, interest subsidies, or other payments; and

§ 502(5)(C)(ii)

 

 

 (ii) payments to the Government including origination and other 

fees, penalties and recoveries;

 including the effects of changes in loan terms resulting from the exercise 

by the guaranteed lender of an option included in the loan guarantee 

contract, or by the borrower of an option included in the guaranteed loan 

contract.

§ 502(5)(D)

 (D) The cost of a modification is the difference between the current 

estimate of the net present value of the remaining cash flows under the 

terms of a direct loan or loan guarantee contract, and the current 

estimate of the net present value of the remaining cash flows under the 

terms of the contract, as modified.

§ 502(5)(E)

 (E) In estimating net present values, the discount rate shall bethe 

average interest rate on marketable Treasury securities of similar 

maturity to the cash flows of the direct loan or loan guarantee for which 

the estimate is being made.

§ 502(5)(F)

 (F) When funds are obligated for a direct loan or loan guarantee, the 

estimated cost shall be based on the current assumptions, adjusted to 

incorporate the terms of the loan contract, for the fiscal year in which the 

funds are obligated.

§ 502(6)

 

 (6) The term "credit program account" means the budget account 

into which an appropriation to cover the cost of a direct loan or loan 

guarantee program is made and from which such cost is disbursed to the 

financing account.

§ 502(7)

 

 (7) The term "financing account" means the non-budget account or 

accounts associated with each credit program account which holds 

balances, receives the cost payment from the credit program account, 

and also includes all other cash flows to and from the Government 

resulting from direct loan obligations or loan guarantee commitments 

made on or after October 1, 1991.

§ 502(8)

 

 (8) The term "liquidating account" means the budget account that 

includes all cash flows to and from the Government resulting from direct 

loan obligations or loan guarantee commitments made prior to October 1, 

1991. These accounts shall be shown in the budget on a cash basis.

§ 502(9)

 

 (9) The term "modification" means any Government action that alters 

the estimated cost of an outstanding direct loan (or direct loan obligation) 

or an outstanding loan guarantee (or loan guarantee commitment) from 

the current estimate of cash flows. This includes the sale of loan assets, 

with or without recourse, and the purchase of guaranteed loans. This also 

includes any action resulting from new legislation, or from the exercise of 

administrative discretion under existing law, that directly or indirectly 

alters the estimated cost of outstanding direct loans (or direct loan 

obligations) or loan guarantees (or loan guarantee commitments) such as 

a change in collection procedures.
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§ 502(10)

 

 (10) The term "current" has the same meaning as in section 

250(c)(9) of the Balanced Budget and Emergency Deficit Control Act of 

1985.

§ 502(11)

 

 (11) The term "Director" means the Director of the Office of 

Management and Budget.

§ 503 SEC. 503. OMB AND CBO ANALYSIS, COORDINATION, AND REVIEW.

§ 503(a)

 (a) IN GENERAL.--For the executive branch, the Director shall be 

responsible for coordinating the estimates required by this title. The Director 

shall consult with the agencies that administer direct loan or loan guarantee 

programs.

§ 503(b)

 (b) DELEGATION.--The Director may delegate to agencies authority to 

make estimates of costs. The delegation of authority shall be based upon 

written guidelines, regulations, or criteria consistent with the definitions in 

this title.

§ 503(c)

 (c) COORDINATION WITH THE CONGRESSIONAL BUDGET OFFICE.--In 

developing estimation guidelines, regulations, or criteria to be used by 

Federal agencies, the Director shall consult with the Director of the 

Congressional Budget Office.

§ 503(d)

 (d) IMPROVING COST ESTIMATES.--The Director and the Director of the 

Congressional Budget Office shall coordinate the development of more 

accurate data on historical performance of direct loan and loan guarantee 

programs. They shall annually review the performance of outstanding direct 

loans and loan guarantees to improve estimates of costs. The Office of 

Management and Budget and the Congressional Budget Office shall have 

access to all agency data that may facilitate the development and 

improvement of estimates of costs.

§ 503(e)

 (e) HISTORICAL CREDIT PROGRAMS COSTS.--The Director shall review, 

to the extent possible, historical data and develop the best possible estimates 

of adjustments that would convert aggregate historical budget data to credit 

reform accounting.

§ 503(f)

 (f) ADMINISTRATIVE COSTS.--The Director and the Director of the 

Congressional Budget Office shall each analyze and report to Congress on 

differences in long-term administrative costs for credit programs versus grant 

programs by January 31, 1992. Their reports shall recommend to Congress 

any changes, if necessary, in the treatment of administrative costs under 

credit reform accounting.

§ 504 SEC. 504. BUDGETARY TREATMENT.

§ 504(a)

 (a) PRESIDENT'S BUDGET.--Beginning with fiscal year 1992, the 

President's budget shall reflect the costs of direct loan and loan guarantee 

programs. The budget shall also include the planned level of new direct loan 

obligations or loan guarantee commitments associated with each

appropriations request.

§ 504(b)

 (b) APPROPRIATIONS REQUIRED. --Notwithstanding any other provision 

of law, new direct loan obligations may be incurred and new loan guarantee 

commitments may be made of fiscal year 1992 and thereafter only to the 

extent that--

§ 504(b)(1)

 (1) new budget authority to cover their costs is provided in advance 

in an appropriations Act;
Federal Credit Reform Act of 1990

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§ 504(b)(2)

 (2) a limitation on the use of funds otherwise available for the cost of 

a direct loan or loan guarantee program has been provided in advance in 

an appropriations Act; or

§ 504(b)(3)

 (3) authority is otherwise provided in appropriation Acts.

§ 504(c)

 (c) EXEMPTION FOR MANDATORY PROGRAMS.--

Subsections (b) and(e) shall not apply to a direct loan or loan guarantee 

program that--

§ 504(c)(1)

 (1) constitutes an entitlement (such as the guaranteed student loan 

program or the veteran's home loan guaranty program); or

§ 504(c)(2)

 (2) all existing credit programs of the Commodity Credit Corporation 

on the date of enactment of this title.

§ 504(d)

 (d) BUDGET ACCOUNTING.--

§ 504(d)(1)

 (1) The authority to incur new direct loan obligations, make new loan 

guarantee commitments, or modify outstanding direct loans (or direct 

loan obligations) or loan guarantees (or loan guarantee 

commitments) shall constitute new budget authority in an amount equal 

to the cost of the direct loan or loan guarantee in the fiscal year in which 

definite authority becomes available or indefinite authority is used. Such 

budget authority shall constitute an obligation of the credit program 

account to pay to the financing account.

§ 504(d)(2)

 (2) The outlays resulting from new budget authority for the cost of 

direct loans or loan guarantees described in paragraph (1) shall be paid 

from the credit program account into the financing account and recorded 

in the fiscal year in which the direct loan or the guaranteed loan is 

disbursed or its costs altered.

§ 504(d)(3)

 (3) All collections and payments of the financing accounts shall be a 

means of financing.

§ 504(e)

 (e) MODIFICATIONS.--An outstanding direct loan (or direct loan 

obligation) or loan guarantee (or loan guarantee commitment) shall not be 

modified in a manner that increases its costs unless budget authority for the 

additional cost has been provided in advance in an appropriations Act.

§ 504(f)

 (f) REESTIMATES.--When the estimated cost for a group of direct loans or 

loan guarantees for a given credit program made in a single fiscal year is 

reestimated in a subsequent year, the difference between the reestimated 

cost and the previous cost estimate shall be displayed as a distinct and 

separately identified subaccount in the credit program account as a change in 

program costs and a change in net interest. There is hereby provided 

permanent indefinite authority for these reestimates.

§ 504(g)

 (g) ADMINISTRATIVE EXPENSES.--All funding for an agency's 

administration of a direct loan or loan guarantee program shall be displayed 

as distinct and separately identified subaccounts within the same budget 

account as the program's cost.

§ 505 SEC. 505. AUTHORIZATIONS.

§ 505(a)

 (a) AUTHORIZATION OF APPROPRIATIONS FOR COSTS.--There are 

authorized to be appropriated to each Federal agency authorized to make 

direct loan obligations or loan guarantee commitments, such sums as may be 

necessary to pay the cost associated with such direct loan obligations or loan 

guarantee commitments.
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§ 505(b)

 (b) AUTHORIZATION FOR FINANCING ACCOUNTS.--In order to 

implement the accounting required by this title, the President is authorized to 

establish such non-budgetary accounts as may be appropriate.

§ 505(c)

 (c) TREASURY TRANSACTIONS WITH THE FINANCING ACCOUNTS.--The 

Secretary of the Treasury shall borrow from, receive from, lend to, or pay to 

the financing accounts such amounts as may be appropriate. The Secretary of 

the Treasury may prescribe forms and denominations, maturities, and terms 

and conditions for the transactions described above, except that the rate of 

interest charged by the Secretary on lending to financing accounts (including 

amounts treated as lending to financing accounts by the Federal Financing 

Bank (hereinafter in this subsection referred to as the "Bank") pursuant to 

section 406(b)) and the rate of interest paid to financing accounts on 

uninvested balances in financing accounts shall be the same as the rate 

determined pursuant tosection 502(5)(E). For guaranteed loans financed by 

the Bank and treated as direct loans by a Federal agency pursuant to section 

406(b), any fee or interest surcharge (the amount by which the interest rate 

charged exceeds the rate determined pursuant to section 502(5)(E)) that the 

Bank charges to a private borrower pursuant to section 6(c) of the Federal 

Financing Bank Act of 1973 shall be considered a cash flow to the 

Government for the purposes of determining the cost of the direct loan 

pursuant to section 502(5). All such amounts shall be credited to the 

appropriate financing account. The Bank is authorized to require 

reimbursement from a Federal agency to cover the administrative expenses of 

the Bank that are attributable to the direct loans financed for that agency. All 

such payments by an agency shall be considered administrative expenses 

subject to section 504(g). This subsection shall apply to transactions related 

to direct loan obligations or loan guarantee commitments made on or after 

October 1, 1991. The authorities described above shall not be construed to 

supersede or override the authority of the head of a Federal agency to 

administer and operate a direct loan or loan guarantee program. All of the 

transactions provided in this subsection shall be subject to the provisions of 

subchapter II of chapter 15 of title 31, United States Code. Cash balances of 

the financing accounts in excess of current requirements shall be maintained 

in a form of uninvested funds and the Secretary of the Treasury shall pay 

interest on these funds.

§ 505(d)(1)

 (d) AUTHORIZATION FOR LIQUIDATING ACCOUNTS.--(1) Amounts in 

liquidating accounts shall be available only for payments resulting from direct 

loan obligations or loan guarantee commitments made prior to October 1,

1991, for--

§ 505(d)(1)(A)

 (A) interest payments and principal repayments to the Treasury or 

the Federal Financing Bank for amounts borrowed;

§ 505(d)(1)(B)

 (B) disbursements of loans;

§ 505(d)(1)(C)

 (C) default and other guarantee claim payments;

§ 505(d)(1)(D)

 (D) interest supplement payments;

§ 505(d)(1)(E)

 (E) payments for the costs of foreclosing, managing, and selling 

collateral that are capitalized or routinely deducted from the proceeds of 

sales;

§ 505(d)(1)(F)

 (F) payments to financing accounts when required for modifications;

§ 505(d)(1)(G)

 (G) administrative expenses, if--
Federal Credit Reform Act of 1990

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§ 

505(d)(1)(G)(i)

 

 

 (i) amounts credited to the liquidating account would have been 

available for administrative expenses under a provision of law in 

effect prior to October 1, 1991; and

§ 

505(d)(1)(G)(ii)

 

 

 (ii) no direct loan obligation or loan guarantee commitment has 

been made, or any modification of a direct loan or loan guarantee 

has been made, since September 30, 1991; or

§ 505(d)(1)(H)

 (H) such other payments as are necessary for the liquidation of such 

direct loan obligations and loan guarantee commitments.

§ 505(d)(2)

 (2) Amounts credited to liquidating accounts in any year shall be 

available only for payments required in that year. Any unobligated balances in 

liquidating accounts at the end of a fiscal year shall be transferred to 

miscellaneous receipts as soon as practicable after the end of the fiscal year.

§ 505(d)(3)

 (3) If funds in liquidating accounts are insufficient to satisfy obligations 

and commitments of such accounts, there is hereby provided permanent, 

indefinite authority to make any payments required to be made on such 

obligations and commitments.

§ 505(e)

 (e) AUTHORIZATION OF APPROPRIATIONS 

FOR IMPLEMENTATIONEXPENSES.--There are authorized to be appropriated 

to existing accounts such sums as may be necessary for salaries and 

expenses to carry out the responsibilities under this title.

§ 505(f)

 (f) REINSURANCE.--Nothing in this title shall be construed as authorizing 

or requiring the purchase of insurance or reinsurance on a direct loan or loan 

guarantee from private insurers. If any such reinsurance for a direct loan or 

loan guarantee is authorized, the cost of such insurance and any recoveries to 

the Government shall be included in the calculation of the cost.

§ 505(g)

 (g) ELIGIBILITY AND ASSISTANCE.--Nothing in this title shall be 

construed to change the authority or the responsibility of a Federal agency to 

determine the terms and conditions of eligibility for, or the amount of 

assistance provided by a direct loan or a loan guarantee.

§ 506 SEC. 506. TREATMENT OF DEPOSIT INSURANCE AND AGENCIES AND 

OTHER INSURANCE PROGRAMS.

§ 506(a)

 (a) IN GENERAL.--This title shall not apply to the credit or insurance 

activities of the Federal Deposit Insurance Corporation, National Credit Union 

Administration, Resolution Trust Corporation, Pension Benefit Guaranty 

Corporation, National Flood Insurance, National Insurance Development Fund, 

Crop Insurance, or Tennessee Valley Authority.

§ 506(b)

 (b) STUDY.--The Director and the Director of the Congressional Budget 

Office shall each study whether the accounting for Federal deposit insurance 

programs should be on a cash basis1 on the same basis as loan guarantees,

or on a different basis. Each Director shall report findings and 

recommendations to the President and the Congress on or before May 31, 

1991.

§ 506(c)

 (c) ACCESS TO DATA.-- For the purposes of subsection (b), the Office of 

Management and Budget and the Congressional Budget Office shall have 

access to all agency data that may facilitate these studies.

§ 507 SEC. 507. EFFECT ON OTHER LAWS

§ 507(a)

 (a) EFFECT ON OTHER LAWS.--This title shall supersede, modify, or 

repeal any provision of law enacted prior to the date of enactment of this title 

to the extent such provision is inconsistent with this title. Nothing in this title 
Federal Credit Reform Act of 1990

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shall be construed to establish a credit limitation on any Federal loan or loan 

guarantee program.

§ 507(b)

 (b) CREDITING OF COLLECTIONS.--Collections resulting from direct loans 

obligated or loan guarantees committed prior to October 1, 1991, shall be 

credited to the liquidating accounts of Federal agencies. Amounts so credited 

shall be available, to the same extent that they were available prior to the 

date of enactment of this title, to liquidate obligations arising from such direct 

loans obligated or loan guarantees committed prior to October 1, 1991, 

including repayment of any obligations held by the Secretary of the Treasury 

or the Federal Financing Bank. The unobligated balances of such accounts 

that are in excess of current needs shall be transferred to the general fund of 

the Treasury. Such transfers shall be made from time to time but, at least 

once each year.

1So in law. There probably should be a comma after "basis".